Van Gilder v. . Bullen

after stating the facts: The rulings of his Honor are upon the ground that the plaintiff is entitled to the judgment rendered, although the defendant may establish his contention that a fraud was practiced upon him and that the plaintiff was a party to it, and we must consider the case and determine the rights of the parties as if these facts were proven.

Assuming, then, for the purposes of the appeal, that the plaintiff and W. S. Hemby conspired to defraud the defendant, that pursuant to this conspiracy they represented to him that Hemby was the owner in fee of the land conveyed to the defendant, that this representation was false, and that it was an inducement to the contract, is the plaintiff entitled to any relief, and if so, to what relief?

The answer to the question depends upon the conduct of the defendant after the discovery of the fraud, as shown by the admitted facts.

As stated in Clark on Contracts, p. 234: "Fraud does not render the contract void, but renders it only voidable at the option of the party defrauded. In other words, it is valid until rescinded. It is for the party defrauded to elect whether he will be bound. He therefore has several remedies on discovering the fraud. First. He may affirm the contract, and bring an action for deceit to recover such damages as the the fraud has occasioned him, or set up such damages by way of recoupment or counterclaim, if sued upon the contract by the other party. . . . Second. He may rescind the contract, and (1) (295) sue in an action of deceit, for any damages he may have sustained by reason of the fraud; (2) if he has paid money under the contract, he may recover it back; or (3) he may resist an action at law brought against him on the contract; or (4) he may resist a suit in equity by the other party for specific performance; or (5) he may himself sue in equity to have the contract judicially canceled and set aside."

It is also well established that the right to rescind must be exercised promptly, and if there is unreasonable delay, the right is lost, and the party defrauded is generally relegated to his action for damages. Alexanderv. Utley, 42 N.C. 242; Knight v. Houghtalling, 85 N.C. 17.

In the first of these cases a delay of twelve months was held to be fatal to the right, and in the second, Ruffin, J., speaking for the Court, says: "A party is not bound to abandon a contract brought about by fraud and imposition upon him, but he may, if he sees proper, adhere to the contract and seek his compensation for the fraud in an action at law for damages. . . . The law allows the purchaser in such a case to either abandon the contract absolutely or else abide by it and sue at law for the deceit, and the only requirement it puts upon him is to make and declare his election the moment the knowledge of the fraud is attained by him. . . . The rule of law is, that he who would rescind a contract to which he has become a party must offer to do so promptly on discovering the facts that will justify a rescission, and while he is able of himself, or with the aid of the court, to place the opposite party substantially instatutu quo; he must not only act promptly upon the first discovery of the fraud, if fraud be the cause assigned for the rescission asked, but he must act decidedly, so that his vendor may certainly know his purpose, and thereby have the opportunity afforded him to assent to the rescission, resume the property, and look out for another purchaser. In no case is he permitted to rescind when he has continued to treat with his vendor upon the basis of the contract after his discovery of the fraud practiced upon him, and neither is it allowed him to rescind in part and to affirm in part; but if done at all it must be done (296) in toto. This rule is founded on the plainest principles of justice, and has been universally recognized."

Applying these principles to the facts, we must hold that the defendant has no right to a rescission of the contract, as there was a delay of about two years, after the discovery of the alleged fraud, before this action was commenced, during which time the defendant retained the deed procured by the contract, and did no act indicating a purpose to rescind. On the contrary, his purchase of the title of the remainderman would suggest that he intended to perfect his title and abide by the contract.

The defendant, having lost his right to a rescission of the contract, was entitled to recover damages, and in our opinion the rule adopted by his Honor, limited the recovery of damages to the amount paid out by the defendant to make his title as it was represented to be, was correct. Bigelow on Estoppel, 357; Westall v. Austin, 40 N.C. 1; Kindley v. Gray,41 N.C. 445; Ramsour v. Shuler, 55 N.C. 487; Bank v. Glenn. 68 N.C. 35.

In Kindley v. Gray, supra, the Court says: "Instead of availing himself of the power to annul the contract, the plaintiff took a deed from Cooper (who held the outstanding legal title against him), and then filed this bill, asking peremptorily in the first place to have the contract rescinded. But he cannot get that, for he has now a title to the thing he bought from the defendant. The plaintiff shall be reimbursed by the defendant what it cost him to get the legal title. That is the utmost he can claim."

We do not, however, approve the judgment rendered. The defendant entered a voluntary appearance in the action, and he has accepted a deed in which it is stipulated that he agrees to pay the mortgage debt as a part of the consideration. This agreement, if not in writing, would not come within the statute of frauds. (Peele v. Powell, 156 N.C. 553), and one who claims the benefit of a deed must assume its burdens. Drake v. Howell,133 N.C. 166. We see no reason, therefore, for denying the plaintiff a personal judgment against the defendant.

We are further of opinion that the plaintiff is not entitled (297) to an order of sale or a decree of foreclosure.

At the time W. S. Hemby executed the mortgage to Dunlap, which the plaintiff now owns, he had only a life estate in the land, and the only security for the debt was the conveyance of that estate. No decree can be rendered that will operate on the life estate, bcause [because] Hemby is dead, and the remainder interest cannot be subjected to the payment of the debt, as it was not conveyed by the mortgage, unless because this interest was afterwards purchased by the defendant, and we do not think the purchase by the defendant has this effect. The doctrine of feeding an estoppel by the acquisition of an interest or estate after the execution of a deed does not apply, because the defendant executed no deed for this land to the plaintiff, nor to any one under whom he claims, nor does the fact that both parties claim under W. S. Hemby prevent the defendant from claiming the remainder.

As stated in McCoy v. Lumber Co., 149 N.C. 1, and approved in Samplev. Lumber Co., 150 N.C. 161, and in Bryan v. Hodges, 151 N.C. 414, the rule, enforced in the trial of title to land, that when both parties claim title under the same person, it is not competent for either to deny the title of such person, "is not in strictness an application of the doctrine of estoppel, but is a rule established for the convenience of parties in actions of this character, relieving them of the necessity of going back further than the common source when it is apparent that both parties are acting in recognition of this common source as the true title," and is never permitted to prevent one from showing that he has acquired a better title. Love v. Gates, 20 N.C. 363; Copeland v. Sauls,46 N.C. 73; Forbes v. Hunter, 46 N.C. 231; Ray v. Gardner, 82 N.C. 146.

Practically the same doctrine is announced, in different language, and the reasons for it given by Chief Justice Marshall, in Bright v. Rochester, 7 Wheat., 540. He says: "It is contended that he is so restrained because John Dunlap sold to Hunter, and Hunter has conveyed to the present defendant. It is very certain that these sales do not create a legal estoppel. The defendant has executed no deed to prevent (298) him from averring and proving the truth of the case. If he is bound in law to admit a title which has no exsitence [existence] in reality, it is not on the doctrine of estoppel that he is bound. It is because, by receiving a conveyance of a title which is deduced from Dunlap, the moral policy of the law will not permit him to contest that title. This principle originates in the relation between lessor and lessee, and so far as respects them is well established, and ought to be maintained. The title of the lessee is, in fact, the title of the lessor. He comes in by virtue of it, and rests upon it to maintain and justify his possession. . . . The propriety of applying the doctrine between lessor and lessee to a vendor and vendee may well be doubted. The vendee acquires the property for himself, and his faith is not pledged to maintain the title of the vendor. The rights of the vendor are intended to be extinguished by the sale and he has no continuing interest in the maintenance of his title, unless he should be called upon in consequence of some covenant or warranty in his deed. The property having become, by the sale, the property of the vendee, he has a right to fortify that title by the purchase of any other which may protect him in the quiet enjoyment of the premises. No principle of morality restrains him from doing this, nor is either the letter or the spirit of the contract violated by it. The only controversy which ought to arise between him and the vendor respects the payment of the purchase money. How far he may be bound to this by law, or by the obligations of good faith, is a question depending on all the circumstances of the case; and in deciding it, all those circumstances are examinable."

The following authorities sustain the same view: Merryman v. Brown,76 U.S. 592; Ousterhout v. Shoemaker, 3 Hill, 518; Sands v. Davis,40 Mich. 18; Averill v. Wilson, 4 Barb., 185; Mattison v. Ausmuss,50 Mo., 553.

For the reasons given, and because there is no agreed statement of facts upon which a judgment might be entered, there must be a

New trial.

Cited: Torrey v. McFayden, 165 N.C. 241.